So, you are contemplating the sale of your business. Maybe you have already made the decision to sell your company and have an offer in hand. While there are probably a certain number of serial entrepreneurs who will do this more than once, for many business owners this will be the single most significant financial transaction of their lifetime.
For this major milestone event, a seller may engage certain professionals that support the sale: a sell-side adviser, an attorney for legal representation, their CPA to help provide key information for a buyer-maybe even an investment banker. These professionals are often focused on providing support through the date of the sale. However, your personal financial life not only continues after the sale-it often becomes more complex. This is where a personal wealth advisor can add significant value to your personal financial picture.
There are a variety of considerations when engaging the right personal wealth advisor, in general, and specifically in the case of someone selling their business:
- Know that not all Wealth Advisors work under the same standard. A wealth advisor that works for a Registered Investment Advisor firm (sometimes known as an "RIA") is held to a fiduciary standard. A fiduciary standard means the advisor must always provide objective advice and place the client's needs first. These advisors must ensure they are fully transparent in terms of fees and pricing and must ensure their recommendations align with the client's financial goals. A wealth advisor that is not part of an RIA may not be held to this type of standard.
- Integration with your tax adviser. In many cases, the proceeds from the sale of a business will be subject to a capital gains tax. Wealth advisors that have a strong relationship with your tax adviser can collaborate pre-sale and post-sale on the best investment strategies for your tax situation. Some wealth advisers have access to specific tax beneficial investment vehicles that may be able to reduce your taxes from the sale.
- Tools and resources. While you probably do not quiz your electrician or plumber as to what tools they bring to a job site, it's a good idea to ask your wealth advisor whether they have tools suited for your situation. Helpful tools can include financial planning software managed by the advisor to run projections for lifetime spending or programs that can model tax planning scenarios. There are also various value-add services an advisor may provide that include cash sweep services with fully FDIC-guaranteed accounts, aggregate reporting tools to provide you a full picture of all assets, or even access to risk management solutions via insurance products.
- Are the advisor's client relationships solely focused on investment strategy or do they use a planning-based approach? Selling the business that you have built over many years is a life-changing event that also has significant financial implications. While investment strategy is an important component of an overall personal financial plan, there are many other elements that potentially need to be addressed. Do their team members have credentials or experience in financial planning? Do they have access to estate planning professionals? Do they actually have experience with helping a business owner transition to that next chapter where their portfolio supports their new lifestyle?
The funds you receive from the sale of your business could be viewed as your "lifetime achievement award." For most sellers, these funds will also need to support them for the rest of their life. Making the right decision regarding your wealth advisor to support you can have a significant impact on how you and your family make this transition.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
